Louis Zeckendorf v. Albert Steinfeld No 139 Albert Steinfeld v. Louis Zeckendorf No 140

• Decision Date: 07 June 1912
• Docket Number: Nos. 139 and 140,s. 139 and 140
• Parties: LOUIS ZECKENDORF, Appt., v. ALBERT STEINFELD, J. N. Curtis, R. K. Shelton, et al. NO 139 ALBERT STEINFELD, J. N. Curtis, R. K. Shelton, et al., Appts., v. LOUIS ZECKENDORF and Silver Bell Copper Company. NO 140
• Court: U.S. Supreme Court

225 U.S. 445

32 S.Ct. 728

56 L.Ed. 1156

LOUIS ZECKENDORF, Appt.,

v ALBERT STEINFELD, J. N. Curtis, R. K. Shelton, et al.

NO 139

ALBERT STEINFELD, J. N. Curtis, R. K. Shelton,

et al., Appts.,

v. LOUIS ZECKENDORF and Silver Bell Copper Company.

NO 140.

Nos. 139 and 140.

Argued March 15, 1912.

Decided June 7, 1912.

Messrs. Frank H. Hereford and Edwin A. Meserve for Zeckendorf.

Messrs. Eugene S. Ives and Francis J. Heney for Steinfeld et al.

Mr. Justice Day delivered the opinion of the court:

Louis Zeckendorf brought this suit in the district court of Pima county, territory of Arizona, as a stockholder of the Silver Bell Copper Company, hereinafter called the Silver Bell Company, for and on its behalf, against Albert Steinfeld, J. N. Curtis, and R. K. Shelton, as individuals and as officers and directors of the Silver Bell Company, the Silver Bell Company, and a certain company known as the Mammoth Copper Company. He sought to recover $338,710.15 for so much money wrongfully appropriated by and to the use of the defendant Steinfeld, which rightfully belonged to the Silver Bell Company, and to recover, as belonging to the company, 300 shares of stock in the Silver Bell Company. There was also a prayer for an accounting and the return of the money and shares and for the appointment of a receiver. Steinfeld answered that the money, a portion of which was the proceeds of certain mining properties which had belonged to him and had been sold in conjunction with properties belonging to the Silver Bell Company, and shares of stock, belonged to him, and for reasons set forth were rightfully in his possession.

The district court, upon the first trial, found in favor of Zeckendorf. This judgment was reversed by the supreme court of Arizona and the case sent back for further Findings. 10 Ariz. 221, 86 Pac. 7. The pleadings were amended, the amended complaint dividing the controversy into two causes of action, the first embracing the ownership of the proceeds of sale taken by Steinfeld and the second the title to the 300 shares of stock and dividends thereon. Upon the second trial the district court found against Zeckendorf on the first cause of action and against Steinfeld on the second cause of action upon the facts found, made certain provisions as to attorney fees, and, in view of the situation of the Silver Bell Company, appointed a receiver and ordered that the property and the assets of the company be turned over to him for distribution according to the order and judgment of the court, and that upon final hearing the Silver Bell Company be dissolved, its debts paid and assets distributed among the stockholders according to their rights. The court further ordered that Steinfeld should hold in his hands the sum of $25,750 to secure him against his liability as garnishee in a case by one Franklin against the Silver Bell Company, Steinfeld to account to the company for the money on the final determination of the action. An appeal was again taken to the supreme court of the territory of Arizona, and that court affirmed the judgment and orders of the district court. 12 Ariz. 245, 100 Pac. 784.

Both parties appealed. No. 139 is the appeal of Zeckendorf from that part of the judgment dismissing on the merits his first cause of action, concerning the moneys paid to Steinfeld. No. 140 is the appeal of Steinfeld from the order and judgment holding that the 300 shares of stock belong to the company, and requiring him to account for the dividends thereon. The supreme court of the territory made elaborate findings of fact, adopting the findings of the district court and making certain findings of its own. So far as necessary to determine the case as we view it, the findings may be summarized as follows:

Since 1878 Albert Steinfeld and Louis Zeckendorf have been partners under the firm name of Louis Zeckendorf & Company. Zeckenford lived in the city of New York. Steinfeld resided in the city of Tucson, Arizona, and was the active member of the firm in its mining operations. William and Julia Zeckendorf were the owners of a certain mine known as the Old Boot or Mammoth mine, which was being operated by the Carl Nielsen, under contract with Steinfeld as trustee of the owners. Nielsen became so indebted to the partnership that, in order to secure such indebtedness, in January, 1899, a company was incorporated under the laws of Arizona known as the Nielsen Mining & Smelting Company, the name being changed on January 14, 1901, to the Silver Bell Mining Company, and all the stock of the company was originally issued to Carl Nielsen, in consideration of the transfer to the company of his rights in the Old Boot mine, and a like transfer of personal property used in working the mine. The stock was divided as follows: 499 shares to L. Zeckendorf & Company, 30 shares to Albert Steinfeld, trustee of William and Julia Zeckendorf, 170 shares to J. N. Curtis, 300 shares to Carl Nielsen, and one share to R. K. Shelton, but being in fact the property of L. Zeckendorf & Company. In January, 1901, the 300 shares in Nielsen's name were transferred on the books of the company to the name of Albert Steinfeld, trustee. On the 6th of June, 1903, the 499 shares of L. Zeckendorf & Company were divided, 250 shares to Louis Zeckendorf and 249 shares to Albert Steinfeld, Steinfeld taking the one share standing in the name of Shelton, which was in Steinfeld's possession until December 9, 1903, when it was given to Shelton. At the meeting of the stockholders Steinfeld voted the stock in his name as trustee, and the stock of L. Zeckendorf & Company, and Louis Zeckendorf was never at any stockholders' meeting and did not vote therein by proxy until the stockholders' meeting of December 26, 1903, at which he was present. Subsequent to January 14, 1901, Albert Steinfeld, J. N. Curtis, and R. K. Shelton were the directors of the corporation, all residing in Tucson, Arizona. Shelton was at all times the representative of Steinfeld on the board of directors of the company, and at all times involved in this action veted as ordered, directed, and requested by Steinfeld. After June 6, 1903, J. N. Curtis, as director and other officer of the Silver Bell Company, was under the dominion and control of Steinfeld and did as he directed.

In the year 1900 Steinfeld purchased, in his own name and in the name of the Mammoth Copper Company, which was owned and controlled by him, certain mining properties in the neighborhood of the Old Boot mine, known as the English Group of Mines, and in September, 1900, proceeded to Europe, and there concluded the purchase of the English title to that group.

The findings of fact sent up to us, and which must alone be the basis of our judgment (Eagle Min. & Improv. Co. v. Hamilton, 218 U. S. 513, 515, 54 L. ed. 1131, 1132 31 Sup. Ct. Rep. 27), showing that Steinfeld, in purchasing the English Group of Mines, did not purchase them with the intent that they should thereby become the property of the Silver Bell Company, but that at that time he purposed to give the Silver Bell Company an opportunity to take the mines upon reimbursing him for his outlays and expenditures in that connection, which he expected the Silver Bell Company would do, intending, if it did not to keep them for his own. In our view, the facts found show that Steinfeld and the company effectually carried out this purpose, and that the subsequent attempt to rescind the action by which the proceeds of the sale of the English Group of Mines became the property of the Silver Bell Company, and to give the proceeds to Steinfeld, must be held for naught.

The findings show that after the acquisition of the English Group of Mines Steinfeld turned them over to the possession of the Nielsen Mining & Smelting Company (the name of which was subsequently changed to the Silver Bell Copper Company), which assumed the possession and control of them; that they were operated in connection with the other mining property of the company, known as the Old Boot mine; that maps were prepared, under the direction of Steinfeld, showing the mining properties as one entire group of mines, and that the president of the company made reports of the mines as the properties of the Silver Bell Company; that these maps and reports were sent to Zeckendorf and others, and that efforts were made by Steinfeld to sell the properties as a whole, including the English Group.

In the early part of 1901, Curtis, who was president of the Silver Bell Company, holding certain shares in his own right, contended that the English Group of mines was held in trust by Steinfeld for the Silver Bell Company. Both parties consulted one Franklin, an attorney, who advised that Steinfeld could not hold the properties as his own until he had given the company an opportunity to take them upon reimbursing him for his outlays and expenses, and it had declined to do so.

Steinfeld acquiesced in this position, and on July 15, 1901, made a proposition in writing to the Silver Bell Company. The substance of this proposal was that he would hold in trust for the Silver Bell Company all the mining properties controlled by him, the company to as- sume all obligations, counsel fees, etc., to pay for the annual assessment work, and to reimburse him for his outlays on or before the 15th of October, 1901 (and that he would also turn over the Nielsen stock in controversy in the second cause of the action upon the assumption of certain obligations). And upon compliance with the terms of the proposition the mining properties were to belong to the Silver Bell Company. Steinfeld stated in this proposal:

'I am of the opinion that all of the mining claims and mill sites and property acquired, as above set forth, by the Mammoth Mining Company and by myself, are of great value to you, and that your company should own the same, and as an inducement to you to purchase and acquire the same, I am willing to place you in my shoes; that is to say, to...